NORWALK, Conn.--(EON: Enhanced Online News)--The newly published 2014
Terra Technology Forecasting Benchmark Study finds that “growth
through innovation” strategies continue to drive supply chain complexity
at a rapid pace, making it harder for businesses to forecast. Data shows
that demand planning has reached a performance ceiling with forecast
value-added declining for a second year.

“It’s an exciting time in supply chain and I think we are close to a
technology revolution. While driverless cars and drone deliveries are
getting much of the press coverage, supply chain planning is finally
starting to evolve”

Terra’s fifth annual study analyzes demand planning performance for 13
multinational consumer products companies. It encompasses almost $200
billion in annual sales from North American and European businesses,
with seven billion cases and 800,000 item-location combinations.

“It’s an exciting time in supply chain and I think we are close to a
technology revolution. While driverless cars and drone deliveries are
getting much of the press coverage, supply chain planning is finally
starting to evolve,” says Robert F. Byrne, CEO of Terra Technology. “The
steady stream of new product introductions combined with economic
volatility and changing consumer preferences renders traditional
forecasting methods obsolete. Our study confirms demand sensing as an
enabling technology to break through the demand planning performance
ceiling.”

Key findings for North America include:

Network complexity continues to increase at a rapid pace. The
number of items for sale has increased by 30% since 2009. During the
same period, shipments have grown by 2% causing average sales per item
to fall by 22%.

The rate of new product introductions is considerably higher, with
more than twice as many new items introduced over five years as
existed in 2009; 85% of those have been discontinued.

Forecast value-added trends downwards again, losing 1% for an
average of 12%; value-added measures the impact of demand planning
efforts to improve a naïve statistical forecast.

The long tail continues to be a challenge for consumer products
companies with the slowest-moving 50% of items contributing only
1% of sales while the fastest-moving 10% of items generate 75%.

Demand Planning is essentially stuck, with error hovering
around 50% mark since the beginning of the study.

Demand Sensing provides a step-change in performance, cutting
average forecast error by38% across all items encompassed in
the study and by 34% for new products.

The distinct regional requirements in Europe require more complex supply
chains. Average sales volume per item was 2 times lower than in America,
resulting in higher bias and forecast error.

This year’s study has been expanded to include findings on productivity.
Participants unanimously report that planners spend too much time on
mundane number-crunching tasks when that time should really be invested
in more strategic activities. So it comes as no surprise that of the
companies with higher than average forecast value-added, 65% have
lighter workloads in terms of the number of products assigned to each
full-time demand planner.

“We are thrilled that our customers find the study so valuable,” says
Byrne. “The study’s insights allow member companies to compare their
planning performance to peers and between business units, brands or even
specific items within their organization. This has resulted in a number
of tangible initiatives at member companies to reduce supply chain
complexity, improve service and lower costs.”

The public version of the benchmark report captures the state of demand
planning performance in North America, allowing readers to compare their
forecast performance against the industry average and top performing
companies. Terra publishes this information to contribute to the
advancement of supply chain planning and encourage the pursuit of
forecast excellence across all industries.